Central Ohio hospitals' community help shifts away from charity care

Sunday

Jan 26, 2014 at 12:01 AMJan 26, 2014 at 12:59 PM

Central Ohio's three adult hospital systems spent a record $531.5 million to benefit the community in fiscal year 2013, which ended June 30. Nationwide Children's Hospital spent $122 million in calendar 2012, the most recent year for which numbers are available.

Ben Sutherly, The Columbus Dispatch

Central Ohio’s three adult hospital systems spent a record $531.5 million to benefit the community in fiscal year 2013, which ended June 30.

Nationwide Children’s Hospital spent $122 million in calendar 2012, the most recent year for which numbers are available.

But the hospitals’ bottom lines aren’t hurting as a result. For example, OhioHealth had an operating surplus of 8.5?percent on revenue of $2.5?billion in fiscal 2013; among its peers nationwide, the operating surplus averaged 3.9 percent.

The way that hospitals help their communities is evolving. Just 30 percent of community-benefit spending at local hospitals now is traditional “charity care” — services hospitals provide without an expectation of payment, after determining that a patient is unable to pay.

That trend away from traditional charity care is expected to continue. One major reason is Ohio’s expansion of Medicaid under the Affordable Care Act. Adult hospitals can expect to spend less on charity care for the uninsured but will see a greater Medicaid shortfall, as children’s hospitals already do, said Tim Robinson, chief financial officer at Nationwide Children’s Hospital.

Medicaid payments don’t cover the entire cost of care that hospitals provide. And as part of the Medicaid expansion, Ohio’s hospitals are seeing their inpatient Medicaid rates cut 5 percent. So a bigger share of the hospitals’ community benefit will come in the form of covering the cost of that Medicaid shortfall.

Ohio State University’s Wexner Medical Center saw its charity care decline 6 percent in fiscal 2013. Meanwhile, its net community benefit — of which charity care is a part — grew 6 percent.

Jeff Ellison, Wexner Medical Center’s administrative director of finance, attributed the smaller charity-care total to an improving economy in which more patients can pay their bills. But greater spending on research and residency programs drove its net community benefit higher, he said.

A study last year in the New England Journal of Medicine found wide variations in how much spending hospitals devote to benefitting their communities, with some spending less than 1 percent. Others spent about 20 percent.

The study found that the average community benefit in fiscal 2009 was 7.5 percent. All of central Ohio’s hospital systems currently report community-benefit spending that’s more generous than that.

Most hospitals are tax-exempt, and if they appear affluent, it can generate debate about whether their tax breaks are justified, said Gary Young, who is one of the study’s authors and the director of the Center for Health Policy and Healthcare Research at Northeastern University in Boston.

For example, the city of Pittsburgh sued the University of Pittsburgh’s health system last year to try to strip its tax-exempt status.

Hospitals aren’t required to justify their tax breaks in Ohio.

Among local nonprofit hospital systems, only OhioHealth and Mount Carmel said they had calculated how their community benefit stacked up against the value of their tax exemption.

OhioHealth said a consultant determined that its community benefit exceeded by $85 million any taxes it would have to pay if it were a for-profit institution. Mount Carmel said it internally calculated that its community benefit exceeds the value of its tax exemption by

$43.6 million.

Under the Affordable Care Act, hospitals have to assess the health needs of their community and come up with ways to meet them. In central Ohio, hospitals determined the needs collectively with the help of public-health officials. They all signed on to a joint project — encouraging women to breast-feed, considered a key way to improve babies’ immune systems and reduce the chances of obesity later in childhood.

The success of the initiative will be measured by the percentage of women who are breast-feeding when they are discharged from the hospital after a birth.

It’s all part of a more broadly focused community benefit that is placing more emphasis on activities that improve community health in general.

Hospital systems such as OhioHealth and Mount Carmel already have street-medicine programs — basically, a physician’s office on wheels — that provide free care. And Mount Carmel is having patient advocates meet with people arriving at the emergency departments at Mount Carmel West and St. Ann’s to help link them with primary-care doctors, to possibly head off the need for a future emergency visit.

“Some of the things that aren’t as expensive can make a big impact,” said Julie Trocchio, senior director of community benefit and continuing care at the Catholic Health Association of the United States. “Dollar figures don’t tell the whole story.”

Statewide, Ohio’s hospitals provided a net community benefit of

$3.12 billion in 2011, up slightly from the previous year, according to new data from the Ohio Hospital Association.

But after peaking at $1.09 billion in 2009, the hospitals’ total charity care eased off to $989 million in 2011.

Association spokesman John Palmer said some Ohio hospitals have smaller budgets for charity care as a result of the lower reimbursements hospitals are receiving from several sources, as well as growth in bad debt. Hospitals statewide incurred $840 million in bad debt in 2011, a 30?percent increase from the previous year.

Bad debt is not included in hospitals’ tallies of their net community benefit.